Supply and Demand Price action

The Importance of Higher Time Frames

Most people are all over the place when it comes to what is the perfect time frame, or where to trade for short term, swing or even trend follower. There is no specific time frame, it is down to the trader himself/ herself. It all depends on how he/she is trained to see price action in the fx market. To the untrained eye, definitely will consider most of the lower tf noise.

The fact that all time frame communicate the exact same thing , giving off money on the table. As I mention before, the on going supply and demand is everyday and almost every time frame can be seen. Hence the limitless opportunities.

Today I am giving of some examples I am extracting from the Forextester backtesting software.

on the left is the H1 on the EURUSD. On the right is a Daily Chart. With my so called Supply demand level indicator, I am able to plot the Supply demand level on the 4h into the H1 time frame so I don’t need to look for the 4h chart. Because I use my H1 as an entry chart.

To summarise:

Daily Chart – Trend and location

H4 – levels of demand and supply

H1 – Entry Price action confirmation.

Price moves or behaves in a way that it went as per orderflow. Every move of price action is from balance to imbalance to balance. So in plain english, filled to unfilled orders.

ON the h1 left charts , there is a reaction off the demand level with an engulfing bar. Now, I was long way before because there is a previous demand before it. On the right, shows a daily chart respecting the support area of the moving average. Now this acts as a dynamic support. This support act as if demands are available.

As soon as the price break through the resistance, I close half and move my SL below a fresh support. This way I can ride my remaining position. Seeing the daily chart there are further resistance up which could see some reaction. But in this case, I would rather clsoe at the H4 supply level where possible price turn as supply is now increasing or sellers are parked.

As you can see the daily chart resistant exactly tally with the supply zone on a smaller time frame. Knowing when to ride a trade and knowing when to exit is key here so as to avoid unnecessary early exit.

This is where our mindset changes when from bull to bear. Ready to sell with a confirm price action Pbar or engulfing bar inside the 4hr level on a hourly chart entry.

We are now on the sell side after hitting the TP. We sell after acknowledging that an almost pin bar shows at the supply zone. Also what confirms us is that it is at a high resistant area of the daily chart. Both is an excellent confirmation signal and affirm our trade.

As you can see, I am pointing out the red arrow, showing area where we have to be careful as we know this area is a support and needs to be filled before going further down. There fore we must protect our position by moving it below our entry. You can also close half the position here to avoid winners turn into losers. At least banking half wont hurt our psychology of being in the greed zone.

This is a good example of holding the trade. Remember it may test your weak mindset by closing a trade early. In this case I didn’t because 1. I have not see any price action that confirms a reversal up. 2. I have protect my position by moving my SL below my entry and close half at the support area. so Its a risk free trade. Then look what happen. On the hourly showing after the corrective a strong impulse bear candle. Followed by an engulfing at the support failed to hold hence that area is now a fresh supply.

We are done with that sell side now we proceed to another buy back. Can you see it now, this is on going on and on and on! Im sure I had to stop if it is friday. But you can hold this trade over the weekend. The problem with that what if there are significant news over the weekend, you dont want to spoil your weekly profit for a disaster weekend. In this case close the trade before market close or set the nearest resistant as profit target or just aim 1: 2 RR.

So clearly, Prices are govern well by this on going imbalance and rebalancing zone. Orders are filled and will move until it is fully matched. This price action is what I trade and my group does.

Clearly with having the daily chart as your radar, it aid in trading your short term trade that can turn massive profits or even becomes a large swing. Or simple enough as I trade before, take 10 pips , may be close half or entirely. While remaining position ride it till towards the opposite level!